Why aren’t wages rising? There are now more job vacancies than unemployed people

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There are now more job vacancies than unemployed people.

There were 473,600 officially unemployed people in July, and the latest data show there are currently 480,500 job vacancies.

It’s the first time this has happened in the neoliberal era, since labour markets were massively deregulated from the 1980s onwards.

Orthodox economics suggests the price of labour should be surging, with so much demand for workers and so few unemployed people available.

So where’s the wage growth?

Shouldn’t this be a worker’s paradise?

See the graphic below.

It shows the dynamic we’re apparently experiencing.

According to the Bureau of Statistics, job vacancies have hit a record high. They are more than double their pre-pandemic level.

Callam Pickering, an economist at the global job site Indeed, says the dynamic is creating widespread recruitment difficulties.

But it’s working in jobseekers’ favour, too.

“Jobseekers find themselves in an increasingly favourable position, with greater control over where and how they work and more bargaining power to ask for higher wages or better conditions,” he said.

“With job mobility at a decade high, it’s clear that many workers are taking advantage of that.”

You can see what Mr Pickering means about job mobility by looking at the graph below.

The ABS published it earlier this year.

It shows that 9.5 per cent of employed people changed their employer or business in the 12 months to February.

It was the highest job mobility rate in a decade.

Economists say one of the surest ways to secure a proper pay increase is to switch jobs, and that’s what more workers are doing.

Mr Pickering said these record-high vacancies indicate that labour markets should tighten even further from here.

“If Australian businesses were genuinely concerned about the economic outlook and the impact of inflation and higher interest rates then we’d expect them to pull back on their hiring,” he said.

“Right now, the outlook for the Australian labour market remains exceedingly bright even with growing concerns over high inflation and rising interest rates.

“With job vacancies elevated, we’d expect the labour market to tighten further in the near-term even if filling many of these roles will be difficult,” he said.

Record number of multiple job holders

However, Australia’s economy has just hit another record.

New data on Wednesday showed the number of people holding multiple jobs hit nearly 900,000 in the June quarter.

Lauren Ford, head of Labour Statistics at the ABS, said it means 6.5 per cent of all employed people are now holding two or more jobs.

“This is the highest rate since the quarterly series commenced in 1994, and about 0.5 percentage points above its pre-pandemic level,” she said.

The industries that have the highest number of people working “secondary jobs” are health care and social assistance, administrative services, and education and training.

Ms Ford said the fact that so many people were working two or more jobs had helped to push underemployment down sharply (because more people are getting the hours they want).

It’s pushed the under-utilisation rate down to 1982 levels.

The “under-utilisation rate” captures everyone who is both unemployed and underemployed to show what proportion of the labour force is under-utilised.

In July, the unemployment rate was 3.4 per cent and the underemployment rate was 6 per cent. You add them together to get an under-utilisation rate of 9.4 per cent.

Sally McManus, the secretary of the Australian Council of Trade Unions (ACTU), has condemned the new record of people holding multiple jobs.

“This problem has been exacerbated by employers slicing and dicing what were once full time, permanent jobs into multiple, insecure, outsourced, low-paid jobs. Australia can do so much better than this,” she said.

“The record number of people working more than one job at a time of low unemployment exposes how serious our problems are, headline figures mask the reality of working life in Australia in 2022.”

What about wages?

Nominal wage growth has picked up recently.

It’s finally back to 2014 levels.

But it’s still far below the rate of wage growth achieved before the global financial crisis, when labour markets were not as tight as they are now.

And to complicate matters, the real value of workers’ wages has been deteriorating for the last 12 months because consumer price inflation has been rising so much faster than nominal wages.

Australia couldn’t avoid the global outbreak of inflation.

The next monthly labour force figures will be published tomorrow, so we’ll get new unemployment numbers.

Some economists think this tightness in the labour market will persist, and we could see more people joining the labour force to fight over those job vacancies.

But if we don’t get a wages break-out under these conditions, will we ever?

By business reporter Gareth Hutchens (Original ABC Article)